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Who Can Use 1040ez

Who can use 1040ez 14. Who can use 1040ez Sale of Property Table of Contents Reminder Introduction Useful Items - You may want to see: Sales and TradesWhat Is a Sale or Trade? How To Figure Gain or Loss Nontaxable Trades Transfers Between Spouses Related Party Transactions Capital Gains and LossesCapital or Ordinary Gain or Loss Capital Assets and Noncapital Assets Holding Period Nonbusiness Bad Debts Wash Sales Rollover of Gain From Publicly Traded Securities Reminder Foreign income. Who can use 1040ez If you are a U. Who can use 1040ez S. Who can use 1040ez citizen who sells property located outside the United States, you must report all gains and losses from the sale of that property on your tax return unless it is exempt by U. Who can use 1040ez S. Who can use 1040ez law. Who can use 1040ez This is true whether you reside inside or outside the United States and whether or not you receive a Form 1099 from the payer. Who can use 1040ez Introduction This chapter discusses the tax consequences of selling or trading investment property. Who can use 1040ez It explains the following. Who can use 1040ez What a sale or trade is. Who can use 1040ez Figuring gain or loss. Who can use 1040ez Nontaxable trades. Who can use 1040ez Related party transactions. Who can use 1040ez Capital gains or losses. Who can use 1040ez Capital assets and noncapital assets. Who can use 1040ez Holding period. Who can use 1040ez Rollover of gain from publicly traded securities. Who can use 1040ez Other property transactions. Who can use 1040ez Certain transfers of property are not discussed here. Who can use 1040ez They are discussed in other IRS publications. Who can use 1040ez These include the following. Who can use 1040ez Sales of a main home, covered in chapter 15. Who can use 1040ez Installment sales, covered in Publication 537, Installment Sales. Who can use 1040ez Transactions involving business property, covered in Publication 544, Sales and Other Dispositions of Assets. Who can use 1040ez Dispositions of an interest in a passive activity, covered in Publication 925, Passive Activity and At-Risk Rules. Who can use 1040ez Publication 550, Investment Income and Expenses (Including Capital Gains and Losses), provides a more detailed discussion about sales and trades of investment property. Who can use 1040ez Publication 550 includes information about the rules covering nonbusiness bad debts, straddles, section 1256 contracts, puts and calls, commodity futures, short sales, and wash sales. Who can use 1040ez It also discusses investment-related expenses. Who can use 1040ez Useful Items - You may want to see: Publication 550 Investment Income and Expenses Form (and Instructions) Schedule D (Form 1040) Capital Gains and Losses 8949 Sales and Other Dispositions of Capital Assets 8824 Like-Kind Exchanges Sales and Trades If you sold property such as stocks, bonds, or certain commodities through a broker during the year, you should receive, for each sale, a Form 1099-B, Proceeds From Broker and Barter Exchange Transactions, or substitute statement, from the broker. Who can use 1040ez Generally, you should receive the statement by February 15 of the next year. Who can use 1040ez It will show the gross proceeds from the sale. Who can use 1040ez If you sold a covered security in 2013, your 1099-B (or substitute statement) will show your basis. Who can use 1040ez Generally, a covered security is a security you acquired after 2010, with certain exceptions. Who can use 1040ez See the Instructions for Form 8949. Who can use 1040ez The IRS will also get a copy of Form 1099-B from the broker. Who can use 1040ez Use Form 1099-B (or substitute statement received from your broker) to complete Form 8949. Who can use 1040ez What Is a Sale or Trade? This section explains what is a sale or trade. Who can use 1040ez It also explains certain transactions and events that are treated as sales or trades. Who can use 1040ez A sale is generally a transfer of property for money or a mortgage, note, or other promise to pay money. Who can use 1040ez A trade is a transfer of property for other property or services and may be taxed in the same way as a sale. Who can use 1040ez Sale and purchase. Who can use 1040ez Ordinarily, a transaction is not a trade when you voluntarily sell property for cash and immediately buy similar property to replace it. Who can use 1040ez The sale and purchase are two separate transactions. Who can use 1040ez But see Like-kind exchanges under Nontaxable Trades, later. Who can use 1040ez Redemption of stock. Who can use 1040ez A redemption of stock is treated as a sale or trade and is subject to the capital gain or loss provisions unless the redemption is a dividend or other distribution on stock. Who can use 1040ez Dividend versus sale or trade. Who can use 1040ez Whether a redemption is treated as a sale, trade, dividend, or other distribution depends on the circumstances in each case. Who can use 1040ez Both direct and indirect ownership of stock will be considered. Who can use 1040ez The redemption is treated as a sale or trade of stock if: The redemption is not essentially equivalent to a dividend (see chapter 8), There is a substantially disproportionate redemption of stock, There is a complete redemption of all the stock of the corporation owned by the shareholder, or The redemption is a distribution in partial liquidation of a corporation. Who can use 1040ez Redemption or retirement of bonds. Who can use 1040ez A redemption or retirement of bonds or notes at their maturity is generally treated as a sale or trade. Who can use 1040ez In addition, a significant modification of a bond is treated as a trade of the original bond for a new bond. Who can use 1040ez For details, see Regulations section 1. Who can use 1040ez 1001-3. Who can use 1040ez Surrender of stock. Who can use 1040ez A surrender of stock by a dominant shareholder who retains ownership of more than half of the corporation's voting shares is treated as a contribution to capital rather than as an immediate loss deductible from taxable income. Who can use 1040ez The surrendering shareholder must reallocate his or her basis in the surrendered shares to the shares he or she retains. Who can use 1040ez Worthless securities. Who can use 1040ez Stocks, stock rights, and bonds (other than those held for sale by a securities dealer) that became completely worthless during the tax year are treated as though they were sold on the last day of the tax year. Who can use 1040ez This affects whether your capital loss is long term or short term. Who can use 1040ez See Holding Period , later. Who can use 1040ez Worthless securities also include securities that you abandon after March 12, 2008. Who can use 1040ez To abandon a security, you must permanently surrender and relinquish all rights in the security and receive no consideration in exchange for it. Who can use 1040ez All the facts and circumstances determine whether the transaction is properly characterized as an abandonment or other type of transaction, such as an actual sale or exchange, contribution to capital, dividend, or gift. Who can use 1040ez If you are a cash basis taxpayer and make payments on a negotiable promissory note that you issued for stock that became worthless, you can deduct these payments as losses in the years you actually make the payments. Who can use 1040ez Do not deduct them in the year the stock became worthless. Who can use 1040ez How to report loss. Who can use 1040ez Report worthless securities in Part I or Part II, whichever applies, of Form 8949. Who can use 1040ez In column (a), enter “Worthless. Who can use 1040ez ” Report your worthless securities transactions on Form 8949 with the correct box checked for these transactions. Who can use 1040ez See Form 8949 and the Instructions for Form 8949. Who can use 1040ez For more information on Form 8949 and Schedule D (Form 1040), see Reporting Capital Gains and Losses in chapter 16. Who can use 1040ez See also Schedule D (Form 1040), Form 8949, and their separate instructions. Who can use 1040ez Filing a claim for refund. Who can use 1040ez If you do not claim a loss for a worthless security on your original return for the year it becomes worthless, you can file a claim for a credit or refund due to the loss. Who can use 1040ez You must use Form 1040X, Amended U. Who can use 1040ez S. Who can use 1040ez Individual Income Tax Return, to amend your return for the year the security became worthless. Who can use 1040ez You must file it within 7 years from the date your original return for that year had to be filed, or 2 years from the date you paid the tax, whichever is later. Who can use 1040ez For more information about filing a claim, see Amended Returns and Claims for Refund in chapter 1. Who can use 1040ez How To Figure Gain or Loss You figure gain or loss on a sale or trade of property by comparing the amount you realize with the adjusted basis of the property. Who can use 1040ez Gain. Who can use 1040ez If the amount you realize from a sale or trade is more than the adjusted basis of the property you transfer, the difference is a gain. Who can use 1040ez Loss. Who can use 1040ez If the adjusted basis of the property you transfer is more than the amount you realize, the difference is a loss. Who can use 1040ez Adjusted basis. Who can use 1040ez The adjusted basis of property is your original cost or other original basis properly adjusted (increased or decreased) for certain items. Who can use 1040ez See chapter 13 for more information about determining the adjusted basis of property. Who can use 1040ez Amount realized. Who can use 1040ez The amount you realize from a sale or trade of property is everything you receive for the property minus your expenses of sale (such as redemption fees, sales commissions, sales charges, or exit fees). Who can use 1040ez Amount realized includes the money you receive plus the fair market value of any property or services you receive. Who can use 1040ez If you received a note or other debt instrument for the property, see How To Figure Gain or Loss in chapter 4 of Publication 550 to figure the amount realized. Who can use 1040ez If you finance the buyer's purchase of your property and the debt instrument does not provide for adequate stated interest, the unstated interest that you must report as ordinary income will reduce the amount realized from the sale. Who can use 1040ez For more information, see Publication 537. Who can use 1040ez Fair market value. Who can use 1040ez Fair market value is the price at which the property would change hands between a buyer and a seller, neither being forced to buy or sell and both having reasonable knowledge of all the relevant facts. Who can use 1040ez Example. Who can use 1040ez You trade A Company stock with an adjusted basis of $7,000 for B Company stock with a fair market value of $10,000, which is your amount realized. Who can use 1040ez Your gain is $3,000 ($10,000 − $7,000). Who can use 1040ez Debt paid off. Who can use 1040ez A debt against the property, or against you, that is paid off as a part of the transaction, or that is assumed by the buyer, must be included in the amount realized. Who can use 1040ez This is true even if neither you nor the buyer is personally liable for the debt. Who can use 1040ez For example, if you sell or trade property that is subject to a nonrecourse loan, the amount you realize generally includes the full amount of the note assumed by the buyer even if the amount of the note is more than the fair market value of the property. Who can use 1040ez Example. Who can use 1040ez You sell stock that you had pledged as security for a bank loan of $8,000. Who can use 1040ez Your basis in the stock is $6,000. Who can use 1040ez The buyer pays off your bank loan and pays you $20,000 in cash. Who can use 1040ez The amount realized is $28,000 ($20,000 + $8,000). Who can use 1040ez Your gain is $22,000 ($28,000 − $6,000). Who can use 1040ez Payment of cash. Who can use 1040ez If you trade property and cash for other property, the amount you realize is the fair market value of the property you receive. Who can use 1040ez Determine your gain or loss by subtracting the cash you pay plus the adjusted basis of the property you trade in from the amount you realize. Who can use 1040ez If the result is a positive number, it is a gain. Who can use 1040ez If the result is a negative number, it is a loss. Who can use 1040ez No gain or loss. Who can use 1040ez You may have to use a basis for figuring gain that is different from the basis used for figuring loss. Who can use 1040ez In this case, you may have neither a gain nor a loss. Who can use 1040ez See Basis Other Than Cost in chapter 13. Who can use 1040ez Nontaxable Trades This section discusses trades that generally do not result in a taxable gain or deductible loss. Who can use 1040ez For more information on nontaxable trades, see chapter 1 of Publication 544. Who can use 1040ez Like-kind exchanges. Who can use 1040ez If you trade business or investment property for other business or investment property of a like kind, you do not pay tax on any gain or deduct any loss until you sell or dispose of the property you receive. Who can use 1040ez To be nontaxable, a trade must meet all six of the following conditions. Who can use 1040ez The property must be business or investment property. Who can use 1040ez You must hold both the property you trade and the property you receive for productive use in your trade or business or for investment. Who can use 1040ez Neither property may be property used for personal purposes, such as your home or family car. Who can use 1040ez The property must not be held primarily for sale. Who can use 1040ez The property you trade and the property you receive must not be property you sell to customers, such as merchandise. Who can use 1040ez The property must not be stocks, bonds, notes, choses in action, certificates of trust or beneficial interest, or other securities or evidences of indebtedness or interest, including partnership interests. Who can use 1040ez However, see Special rules for mutual ditch, reservoir, or irrigation company stock, in chapter 4 of Publication 550 for an exception. Who can use 1040ez Also, you can have a nontaxable trade of corporate stocks under a different rule, as discussed later. Who can use 1040ez There must be a trade of like property. Who can use 1040ez The trade of real estate for real estate, or personal property for similar personal property, is a trade of like property. Who can use 1040ez The trade of an apartment house for a store building, or a panel truck for a pickup truck, is a trade of like property. Who can use 1040ez The trade of a piece of machinery for a store building is not a trade of like property. Who can use 1040ez Real property located in the United States and real property located outside the United States are not like property. Who can use 1040ez Also, personal property used predominantly within the United States and personal property used predominantly outside the United States are not like property. Who can use 1040ez The property to be received must be identified in writing within 45 days after the date you transfer the property given up in the trade. Who can use 1040ez The property to be received must be received by the earlier of: The 180th day after the date on which you transfer the property given up in the trade, or The due date, including extensions, for your tax return for the year in which the transfer of the property given up occurs. Who can use 1040ez If you trade property with a related party in a like-kind exchange, a special rule may apply. Who can use 1040ez See Related Party Transactions , later in this chapter. Who can use 1040ez Also, see chapter 1 of Publication 544 for more information on exchanges of business property and special rules for exchanges using qualified intermediaries or involving multiple properties. Who can use 1040ez Partly nontaxable exchange. Who can use 1040ez If you receive money or unlike property in addition to like property, and the above six conditions are met, you have a partly nontaxable trade. Who can use 1040ez You are taxed on any gain you realize, but only up to the amount of the money and the fair market value of the unlike property you receive. Who can use 1040ez You cannot deduct a loss. Who can use 1040ez Like property and unlike property transferred. Who can use 1040ez If you give up unlike property in addition to the like property, you must recognize gain or loss on the unlike property you give up. Who can use 1040ez The gain or loss is the difference between the adjusted basis of the unlike property and its fair market value. Who can use 1040ez Like property and money transferred. Who can use 1040ez If all of the above conditions (1) – (6) are met, you have a nontaxable trade even if you pay money in addition to the like property. Who can use 1040ez Basis of property received. Who can use 1040ez To figure the basis of the property received, see Nontaxable Exchanges in chapter 13. Who can use 1040ez How to report. Who can use 1040ez You must report the trade of like property on Form 8824. Who can use 1040ez If you figure a recognized gain or loss on Form 8824, report it on Schedule D (Form 1040), or on Form 4797, Sales of Business Property, whichever applies. Who can use 1040ez See the instructions for Line 22 in the Instructions for Form 8824. Who can use 1040ez For information on using Form 4797, see chapter 4 of Publication 544. Who can use 1040ez Corporate stocks. Who can use 1040ez The following trades of corporate stocks generally do not result in a taxable gain or a deductible loss. Who can use 1040ez Corporate reorganizations. Who can use 1040ez In some instances, a company will give you common stock for preferred stock, preferred stock for common stock, or stock in one corporation for stock in another corporation. Who can use 1040ez If this is a result of a merger, recapitalization, transfer to a controlled corporation, bankruptcy, corporate division, corporate acquisition, or other corporate reorganization, you do not recognize gain or loss. Who can use 1040ez Stock for stock of the same corporation. Who can use 1040ez You can exchange common stock for common stock or preferred stock for preferred stock in the same corporation without having a recognized gain or loss. Who can use 1040ez This is true for a trade between two stockholders as well as a trade between a stockholder and the corporation. Who can use 1040ez Convertible stocks and bonds. Who can use 1040ez You generally will not have a recognized gain or loss if you convert bonds into stock or preferred stock into common stock of the same corporation according to a conversion privilege in the terms of the bond or the preferred stock certificate. Who can use 1040ez Property for stock of a controlled corporation. Who can use 1040ez If you transfer property to a corporation solely in exchange for stock in that corporation, and immediately after the trade you are in control of the corporation, you ordinarily will not recognize a gain or loss. Who can use 1040ez This rule applies both to individuals and to groups who transfer property to a corporation. Who can use 1040ez It does not apply if the corporation is an investment company. Who can use 1040ez For this purpose, to be in control of a corporation, you or your group of transferors must own, immediately after the exchange, at least 80% of the total combined voting power of all classes of stock entitled to vote and at least 80% of the outstanding shares of each class of nonvoting stock of the corporation. Who can use 1040ez If this provision applies to you, you may have to attach to your return a complete statement of all facts pertinent to the exchange. Who can use 1040ez For details, see Regulations section 1. Who can use 1040ez 351-3. Who can use 1040ez Additional information. Who can use 1040ez For more information on trades of stock, see Nontaxable Trades in chapter 4 of Publication 550. Who can use 1040ez Insurance policies and annuities. Who can use 1040ez You will not have a recognized gain or loss if the insured or annuitant is the same under both contracts and you trade: A life insurance contract for another life insurance contract or for an endowment or annuity contract or for a qualified long-term care insurance contract, An endowment contract for another endowment contract that provides for regular payments beginning at a date no later than the beginning date under the old contract or for an annuity contract or for a qualified long-term insurance contract, An annuity contract for annuity contract or for a qualified long-term care insurance contract, or A qualified long-term care insurance contract for a qualified long-term care insurance contract. Who can use 1040ez You also may not have to recognize gain or loss on an exchange of a portion of an annuity contract for another annuity contract. Who can use 1040ez For transfers completed before October 24, 2011, see Revenue Ruling 2003-76 in Internal Revenue Bulletin 2003-33 and Revenue Procedure 2008-24 in Internal Revenue Bulletin 2008-13. Who can use 1040ez Revenue Ruling 2003-76 is available at www. Who can use 1040ez irs. Who can use 1040ez gov/irb/2003-33_IRB/ar11. Who can use 1040ez html. Who can use 1040ez Revenue Procedure 2008-24 is available at www. Who can use 1040ez irs. Who can use 1040ez gov/irb/2008-13_IRB/ar13. Who can use 1040ez html. Who can use 1040ez For transfers completed on or after October 24, 2011, see Revenue Ruling 2003-76, above, and Revenue Procedure 2011-38, in Internal Revenue Bulletin 2011-30. Who can use 1040ez Revenue Procedure 2011-38 is available at www. Who can use 1040ez irs. Who can use 1040ez gov/irb/2011-30_IRB/ar09. Who can use 1040ez html. Who can use 1040ez For tax years beginning after December 31, 2010, amounts received as an annuity for a period of 10 years or more, or for the lives of one or more individuals, under any portion of an annuity, endowment, or life insurance contract, are treated as a separate contract and are considered partial annuities. Who can use 1040ez A portion of an annuity, endowment, or life insurance contract may be annuitized, provided that the annuitization period is for 10 years or more or for the lives of one or more individuals. Who can use 1040ez The investment in the contract is allocated between the part of the contract from which amounts are received as an annuity and the part of the contract from which amounts are not received as an annuity. Who can use 1040ez Exchanges of contracts not included in this list, such as an annuity contract for an endowment contract, or an annuity or endowment contract for a life insurance contract, are taxable. Who can use 1040ez Demutualization of life insurance companies. Who can use 1040ez If you received stock in exchange for your equity interest as a policyholder or an annuitant, you generally will not have a recognized gain or loss. Who can use 1040ez See Demutualization of Life Insurance Companies in Publication 550. Who can use 1040ez U. Who can use 1040ez S. Who can use 1040ez Treasury notes or bonds. Who can use 1040ez You can trade certain issues of U. Who can use 1040ez S. Who can use 1040ez Treasury obligations for other issues designated by the Secretary of the Treasury, with no gain or loss recognized on the trade. Who can use 1040ez See Savings bonds traded in chapter 1 of Publication 550 for more information. Who can use 1040ez Transfers Between Spouses Generally, no gain or loss is recognized on a transfer of property from an individual to (or in trust for the benefit of) a spouse, or if incident to a divorce, a former spouse. Who can use 1040ez This nonrecognition rule does not apply in the following situations. Who can use 1040ez The recipient spouse or former spouse is a nonresident alien. Who can use 1040ez Property is transferred in trust and liability exceeds basis. Who can use 1040ez Gain must be recognized to the extent the amount of the liabilities assumed by the trust, plus any liabilities on the property, exceed the adjusted basis of the property. Who can use 1040ez For other situations, see Transfers Between Spouses in chapter 4 of Publication 550. Who can use 1040ez Any transfer of property to a spouse or former spouse on which gain or loss is not recognized is treated by the recipient as a gift and is not considered a sale or exchange. Who can use 1040ez The recipient's basis in the property will be the same as the adjusted basis of the giver immediately before the transfer. Who can use 1040ez This carryover basis rule applies whether the adjusted basis of the transferred property is less than, equal to, or greater than either its fair market value at the time of transfer or any consideration paid by the recipient. Who can use 1040ez This rule applies for purposes of determining loss as well as gain. Who can use 1040ez Any gain recognized on a transfer in trust increases the basis. Who can use 1040ez A transfer of property is incident to a divorce if the transfer occurs within 1 year after the date on which the marriage ends, or if the transfer is related to the ending of the marriage. Who can use 1040ez Related Party Transactions Special rules apply to the sale or trade of property between related parties. Who can use 1040ez Gain on sale or trade of depreciable property. Who can use 1040ez Your gain from the sale or trade of property to a related party may be ordinary income, rather than capital gain, if the property can be depreciated by the party receiving it. Who can use 1040ez See chapter 3 of Publication 544 for more information. Who can use 1040ez Like-kind exchanges. Who can use 1040ez Generally, if you trade business or investment property for other business or investment property of a like kind, no gain or loss is recognized. Who can use 1040ez See Like-kind exchanges , earlier, under Nontaxable Trades. Who can use 1040ez This rule also applies to trades of property between related parties, defined next under Losses on sales or trades of property. Who can use 1040ez However, if either you or the related party disposes of the like property within 2 years after the trade, you both must report any gain or loss not recognized on the original trade on your return filed for the year in which the later disposition occurs. Who can use 1040ez See Related Party Transactions in chapter 4 of Publication 550 for exceptions. Who can use 1040ez Losses on sales or trades of property. Who can use 1040ez You cannot deduct a loss on the sale or trade of property, other than a distribution in complete liquidation of a corporation, if the transaction is directly or indirectly between you and the following related parties. Who can use 1040ez Members of your family. Who can use 1040ez This includes only your brothers and sisters, half-brothers and half-sisters, spouse, ancestors (parents, grandparents, etc. Who can use 1040ez ), and lineal descendants (children, grandchildren, etc. Who can use 1040ez ). Who can use 1040ez A partnership in which you directly or indirectly own more than 50% of the capital interest or the profits interest. Who can use 1040ez A corporation in which you directly or indirectly own more than 50% in value of the outstanding stock. Who can use 1040ez (See Constructive ownership of stock , later. Who can use 1040ez ) A tax-exempt charitable or educational organization directly or indirectly controlled, in any manner or by any method, by you or by a member of your family, whether or not this control is legally enforceable. Who can use 1040ez In addition, a loss on the sale or trade of property is not deductible if the transaction is directly or indirectly between the following related parties. Who can use 1040ez A grantor and fiduciary, or the fiduciary and beneficiary, of any trust. Who can use 1040ez Fiduciaries of two different trusts, or the fiduciary and beneficiary of two different trusts, if the same person is the grantor of both trusts. Who can use 1040ez A trust fiduciary and a corporation of which more than 50% in value of the outstanding stock is directly or indirectly owned by or for the trust, or by or for the grantor of the trust. Who can use 1040ez A corporation and a partnership if the same persons own more than 50% in value of the outstanding stock of the corporation and more than 50% of the capital interest, or the profits interest, in the partnership. Who can use 1040ez Two S corporations if the same persons own more than 50% in value of the outstanding stock of each corporation. Who can use 1040ez Two corporations, one of which is an S corporation, if the same persons own more than 50% in value of the outstanding stock of each corporation. Who can use 1040ez An executor and a beneficiary of an estate (except in the case of a sale or trade to satisfy a pecuniary bequest). Who can use 1040ez Two corporations that are members of the same controlled group. Who can use 1040ez (Under certain conditions, however, these losses are not disallowed but must be deferred. Who can use 1040ez ) Two partnerships if the same persons own, directly or indirectly, more than 50% of the capital interests or the profit interests in both partnerships. Who can use 1040ez Multiple property sales or trades. Who can use 1040ez If you sell or trade to a related party a number of blocks of stock or pieces of property in a lump sum, you must figure the gain or loss separately for each block of stock or piece of property. Who can use 1040ez The gain on each item may be taxable. Who can use 1040ez However, you cannot deduct the loss on any item. Who can use 1040ez Also, you cannot reduce gains from the sales of any of these items by losses on the sales of any of the other items. Who can use 1040ez Indirect transactions. Who can use 1040ez You cannot deduct your loss on the sale of stock through your broker if, under a prearranged plan, a related party buys the same stock you had owned. Who can use 1040ez This does not apply to a trade between related parties through an exchange that is purely coincidental and is not prearranged. Who can use 1040ez Constructive ownership of stock. Who can use 1040ez In determining whether a person directly or indirectly owns any of the outstanding stock of a corporation, the following rules apply. Who can use 1040ez Rule 1. Who can use 1040ez Stock directly or indirectly owned by or for a corporation, partnership, estate, or trust is considered owned proportionately by or for its shareholders, partners, or beneficiaries. Who can use 1040ez Rule 2. Who can use 1040ez An individual is considered to own the stock directly or indirectly owned by or for his or her family. Who can use 1040ez Family includes only brothers and sisters, half-brothers and half-sisters, spouse, ancestors, and lineal descendants. Who can use 1040ez Rule 3. Who can use 1040ez An individual owning, other than by applying rule 2, any stock in a corporation is considered to own the stock directly or indirectly owned by or for his or her partner. Who can use 1040ez Rule 4. Who can use 1040ez When applying rule 1, 2, or 3, stock constructively owned by a person under rule 1 is treated as actually owned by that person. Who can use 1040ez But stock constructively owned by an individual under rule 2 or rule 3 is not treated as owned by that individual for again applying either rule 2 or rule 3 to make another person the constructive owner of the stock. Who can use 1040ez Property received from a related party. Who can use 1040ez If you sell or trade at a gain property you acquired from a related party, you recognize the gain only to the extent it is more than the loss previously disallowed to the related party. Who can use 1040ez This rule applies only if you are the original transferee and you acquired the property by purchase or exchange. Who can use 1040ez This rule does not apply if the related party's loss was disallowed because of the wash sale rules described in chapter 4 of Publication 550 under Wash Sales. Who can use 1040ez If you sell or trade at a loss property you acquired from a related party, you cannot recognize the loss that was not allowed to the related party. Who can use 1040ez Example 1. Who can use 1040ez Your brother sells you stock for $7,600. Who can use 1040ez His cost basis is $10,000. Who can use 1040ez Your brother cannot deduct the loss of $2,400. Who can use 1040ez Later, you sell the same stock to an unrelated party for $10,500, realizing a gain of $2,900. Who can use 1040ez Your reportable gain is $500 (the $2,900 gain minus the $2,400 loss not allowed to your brother). Who can use 1040ez Example 2. Who can use 1040ez If, in Example 1, you sold the stock for $6,900 instead of $10,500, your recognized loss is only $700 (your $7,600 basis minus $6,900). Who can use 1040ez You cannot deduct the loss that was not allowed to your brother. Who can use 1040ez Capital Gains and Losses This section discusses the tax treatment of gains and losses from different types of investment transactions. Who can use 1040ez Character of gain or loss. Who can use 1040ez You need to classify your gains and losses as either ordinary or capital gains or losses. Who can use 1040ez You then need to classify your capital gains and losses as either short term or long term. Who can use 1040ez If you have long-term gains and losses, you must identify your 28% rate gains and losses. Who can use 1040ez If you have a net capital gain, you must also identify any unrecaptured section 1250 gain. Who can use 1040ez The correct classification and identification helps you figure the limit on capital losses and the correct tax on capital gains. Who can use 1040ez Reporting capital gains and losses is explained in chapter 16. Who can use 1040ez Capital or Ordinary Gain or Loss If you have a taxable gain or a deductible loss from a transaction, it may be either a capital gain or loss or an ordinary gain or loss, depending on the circumstances. Who can use 1040ez Generally, a sale or trade of a capital asset (defined next) results in a capital gain or loss. Who can use 1040ez A sale or trade of a noncapital asset generally results in ordinary gain or loss. Who can use 1040ez Depending on the circumstances, a gain or loss on a sale or trade of property used in a trade or business may be treated as either capital or ordinary, as explained in Publication 544. Who can use 1040ez In some situations, part of your gain or loss may be a capital gain or loss and part may be an ordinary gain or loss. Who can use 1040ez Capital Assets and Noncapital Assets For the most part, everything you own and use for personal purposes, pleasure, or investment is a capital asset. Who can use 1040ez Some examples are: Stocks or bonds held in your personal account, A house owned and used by you and your family, Household furnishings, A car used for pleasure or commuting, Coin or stamp collections, Gems and jewelry, and Gold, silver, or any other metal. Who can use 1040ez Any property you own is a capital asset, except the following noncapital assets. Who can use 1040ez Property held mainly for sale to customers or property that will physically become a part of the merchandise for sale to customers. Who can use 1040ez For an exception, see Capital Asset Treatment for Self-Created Musical Works , later. Who can use 1040ez Depreciable property used in your trade or business, even if fully depreciated. Who can use 1040ez Real property used in your trade or business. Who can use 1040ez A copyright, a literary, musical, or artistic composition, a letter or memorandum, or similar property that is: Created by your personal efforts, Prepared or produced for you (in the case of a letter, memorandum, or similar property), or Acquired under circumstances (for example, by gift) entitling you to the basis of the person who created the property or for whom it was prepared or produced. Who can use 1040ez For an exception to this rule, see Capital Asset Treatment for Self-Created Musical Works , later. Who can use 1040ez Accounts or notes receivable acquired in the ordinary course of a trade or business for services rendered or from the sale of property described in (1). Who can use 1040ez U. Who can use 1040ez S. Who can use 1040ez Government publications that you received from the government free or for less than the normal sales price, or that you acquired under circumstances entitling you to the basis of someone who received the publications free or for less than the normal sales price. Who can use 1040ez Certain commodities derivative financial instruments held by commodities derivatives dealers. Who can use 1040ez Hedging transactions, but only if the transaction is clearly identified as a hedging transaction before the close of the day on which it was acquired, originated, or entered into. Who can use 1040ez Supplies of a type you regularly use or consume in the ordinary course of your trade or business. Who can use 1040ez Investment Property Investment property is a capital asset. Who can use 1040ez Any gain or loss from its sale or trade is generally a capital gain or loss. Who can use 1040ez Gold, silver, stamps, coins, gems, etc. Who can use 1040ez These are capital assets except when they are held for sale by a dealer. Who can use 1040ez Any gain or loss you have from their sale or trade generally is a capital gain or loss. Who can use 1040ez Stocks, stock rights, and bonds. Who can use 1040ez All of these (including stock received as a dividend) are capital assets except when held for sale by a securities dealer. Who can use 1040ez However, if you own small business stock, see Losses on Section 1244 (Small Business) Stock , later, and Losses on Small Business Investment Company Stock, in chapter 4 of Publication 550. Who can use 1040ez Personal Use Property Property held for personal use only, rather than for investment, is a capital asset, and you must report a gain from its sale as a capital gain. Who can use 1040ez However, you cannot deduct a loss from selling personal use property. Who can use 1040ez Capital Asset Treatment for Self-Created Musical Works You can elect to treat musical compositions and copyrights in musical works as capital assets when you sell or exchange them if: Your personal efforts created the property, or You acquired the property under circumstances (for example, by gift) entitling you to the basis of the person who created the property or for whom it was prepared or produced. Who can use 1040ez You must make a separate election for each musical composition (or copyright in a musical work) sold or exchanged during the tax year. Who can use 1040ez You must make the election on or before the due date (including extensions) of the income tax return for the tax year of the sale or exchange. Who can use 1040ez You must make the election on Form 8949 by treating the sale or exchange as the sale or exchange of a capital asset, according to Form 8949, Schedule D (Form 1040), and their separate instructions. Who can use 1040ez For more information on Form 8949 and Schedule D (Form 1040), see Reporting Capital Gains and Losses in chapter 16. Who can use 1040ez See also Schedule D (Form 1040), Form 8949, and their separate instructions. Who can use 1040ez You can revoke the election if you have IRS approval. Who can use 1040ez To get IRS approval, you must submit a request for a letter ruling under the appropriate IRS revenue procedure. Who can use 1040ez See, for example, Rev. Who can use 1040ez Proc. Who can use 1040ez 2013-1, corrected by Announcement 2013–9, and amplified and modified by Rev. Who can use 1040ez Proc. Who can use 1040ez 2013–32, available at www. Who can use 1040ez irs. Who can use 1040ez gov/irb/2013-01_IRB/ar06. Who can use 1040ez html. Who can use 1040ez Alternatively, you are granted an automatic 6-month extension from the due date of your income tax return (excluding extensions) to revoke the election, provided you timely file your income tax return, and within this 6-month extension period, you file Form 1040X that treats the sale or exchange as the sale or exchange of property that is not a capital asset. Who can use 1040ez Discounted Debt Instruments Treat your gain or loss on the sale, redemption, or retirement of a bond or other debt instrument originally issued at a discount or bought at a discount as capital gain or loss, except as explained in the following discussions. Who can use 1040ez Short-term government obligations. Who can use 1040ez Treat gains on short-term federal, state, or local government obligations (other than tax-exempt obligations) as ordinary income up to your ratable share of the acquisition discount. Who can use 1040ez This treatment applies to obligations with a fixed maturity date not more than 1 year from the date of issue. Who can use 1040ez Acquisition discount is the stated redemption price at maturity minus your basis in the obligation. Who can use 1040ez However, do not treat these gains as income to the extent you previously included the discount in income. Who can use 1040ez See Discount on Short-Term Obligations in chapter 1 of Publication 550. Who can use 1040ez Short-term nongovernment obligations. Who can use 1040ez Treat gains on short-term nongovernment obligations as ordinary income up to your ratable share of original issue discount (OID). Who can use 1040ez This treatment applies to obligations with a fixed maturity date of not more than 1 year from the date of issue. Who can use 1040ez However, to the extent you previously included the discount in income, you do not have to include it in income again. Who can use 1040ez See Discount on Short-Term Obligations in chapter 1 of Publication 550. Who can use 1040ez Tax-exempt state and local government bonds. Who can use 1040ez If these bonds were originally issued at a discount before September 4, 1982, or you acquired them before March 2, 1984, treat your part of OID as tax-exempt interest. Who can use 1040ez To figure your gain or loss on the sale or trade of these bonds, reduce the amount realized by your part of OID. Who can use 1040ez If the bonds were issued after September 3, 1982, and acquired after March 1, 1984, increase the adjusted basis by your part of OID to figure gain or loss. Who can use 1040ez For more information on the basis of these bonds, see Discounted Debt Instruments in chapter 4 of Publication 550. Who can use 1040ez Any gain from market discount is usually taxable on disposition or redemption of tax-exempt bonds. Who can use 1040ez If you bought the bonds before May 1, 1993, the gain from market discount is capital gain. Who can use 1040ez If you bought the bonds after April 30, 1993, the gain is ordinary income. Who can use 1040ez You figure the market discount by subtracting the price you paid for the bond from the sum of the original issue price of the bond and the amount of accumulated OID from the date of issue that represented interest to any earlier holders. Who can use 1040ez For more information, see Market Discount Bonds in chapter 1 of Publication 550. Who can use 1040ez A loss on the sale or other disposition of a tax-exempt state or local government bond is deductible as a capital loss. Who can use 1040ez Redeemed before maturity. Who can use 1040ez If a state or local bond issued before June 9, 1980, is redeemed before it matures, the OID is not taxable to you. Who can use 1040ez If a state or local bond issued after June 8, 1980, is redeemed before it matures, the part of OID earned while you hold the bond is not taxable to you. Who can use 1040ez However, you must report the unearned part of OID as a capital gain. Who can use 1040ez Example. Who can use 1040ez On July 2, 2002, the date of issue, you bought a 20-year, 6% municipal bond for $800. Who can use 1040ez The face amount of the bond was $1,000. Who can use 1040ez The $200 discount was OID. Who can use 1040ez At the time the bond was issued, the issuer had no intention of redeeming it before it matured. Who can use 1040ez The bond was callable at its face amount beginning 10 years after the issue date. Who can use 1040ez The issuer redeemed the bond at the end of 11 years (July 2, 2013) for its face amount of $1,000 plus accrued annual interest of $60. Who can use 1040ez The OID earned during the time you held the bond, $73, is not taxable. Who can use 1040ez The $60 accrued annual interest also is not taxable. Who can use 1040ez However, you must report the unearned part of OID ($127) as a capital gain. Who can use 1040ez Long-term debt instruments issued after 1954 and before May 28, 1969 (or before July 2, 1982, if a government instrument). Who can use 1040ez If you sell, trade, or redeem for a gain one of these debt instruments, the part of your gain that is not more than your ratable share of the OID at the time of the sale or redemption is ordinary income. Who can use 1040ez The rest of the gain is capital gain. Who can use 1040ez If, however, there was an intention to call the debt instrument before maturity, all of your gain that is not more than the entire OID is treated as ordinary income at the time of the sale. Who can use 1040ez This treatment of taxable gain also applies to corporate instruments issued after May 27, 1969, under a written commitment that was binding on May 27, 1969, and at all times thereafter. Who can use 1040ez Long-term debt instruments issued after May 27, 1969 (or after July 1, 1982, if a government instrument). Who can use 1040ez If you hold one of these debt instruments, you must include a part of OID in your gross income each year you own the instrument. Who can use 1040ez Your basis in that debt instrument is increased by the amount of OID that you have included in your gross income. Who can use 1040ez See Original Issue Discount (OID) in chapter 7 for information about OID that you must report on your tax return. Who can use 1040ez If you sell or trade the debt instrument before maturity, your gain is a capital gain. Who can use 1040ez However, if at the time the instrument was originally issued there was an intention to call it before its maturity, your gain generally is ordinary income to the extent of the entire OID reduced by any amounts of OID previously includible in your income. Who can use 1040ez In this case, the rest of the gain is capital gain. Who can use 1040ez Market discount bonds. Who can use 1040ez If the debt instrument has market discount and you chose to include the discount in income as it accrued, increase your basis in the debt instrument by the accrued discount to figure capital gain or loss on its disposition. Who can use 1040ez If you did not choose to include the discount in income as it accrued, you must report gain as ordinary interest income up to the instrument's accrued market discount. Who can use 1040ez The rest of the gain is capital gain. Who can use 1040ez See Market Discount Bonds in chapter 1 of Publication 550. Who can use 1040ez A different rule applies to market discount bonds issued before July 19, 1984, and purchased by you before May 1, 1993. Who can use 1040ez See Market discount bonds under Discounted Debt Instruments in chapter 4 of Publication 550. Who can use 1040ez Retirement of debt instrument. Who can use 1040ez Any amount you receive on the retirement of a debt instrument is treated in the same way as if you had sold or traded that instrument. Who can use 1040ez Notes of individuals. Who can use 1040ez If you hold an obligation of an individual issued with OID after March 1, 1984, you generally must include the OID in your income currently, and your gain or loss on its sale or retirement is generally capital gain or loss. Who can use 1040ez An exception to this treatment applies if the obligation is a loan between individuals and all the following requirements are met. Who can use 1040ez The lender is not in the business of lending money. Who can use 1040ez The amount of the loan, plus the amount of any outstanding prior loans, is $10,000 or less. Who can use 1040ez Avoiding federal tax is not one of the principal purposes of the loan. Who can use 1040ez If the exception applies, or the obligation was issued before March 2, 1984, you do not include the OID in your income currently. Who can use 1040ez When you sell or redeem the obligation, the part of your gain that is not more than your accrued share of OID at that time is ordinary income. Who can use 1040ez The rest of the gain, if any, is capital gain. Who can use 1040ez Any loss on the sale or redemption is capital loss. Who can use 1040ez Deposit in Insolvent or Bankrupt Financial Institution If you lose money you have on deposit in a bank, credit union, or other financial institution that becomes insolvent or bankrupt, you may be able to deduct your loss in one of three ways. Who can use 1040ez Ordinary loss. Who can use 1040ez Casualty loss. Who can use 1040ez Nonbusiness bad debt (short-term capital loss). Who can use 1040ez For more information, see Deposit in Insolvent or Bankrupt Financial Institution, in chapter 4 of Publication 550. Who can use 1040ez Sale of Annuity The part of any gain on the sale of an annuity contract before its maturity date that is based on interest accumulated on the contract is ordinary income. Who can use 1040ez Losses on Section 1244 (Small Business) Stock You can deduct as an ordinary loss, rather than as a capital loss, your loss on the sale, trade, or worthlessness of section 1244 stock. Who can use 1040ez Report the loss on Form 4797, line 10. Who can use 1040ez Any gain on section 1244 stock is a capital gain if the stock is a capital asset in your hands. Who can use 1040ez Report the gain on Form 8949. Who can use 1040ez See Losses on Section 1244 (Small Business) Stock in chapter 4 of Publication 550. Who can use 1040ez For more information on Form 8949 and Schedule D (Form 1040), see Reporting Capital Gains and Losses in chapter 16. Who can use 1040ez See also Schedule D (Form 1040), Form 8949, and their separate instructions. Who can use 1040ez Holding Period If you sold or traded investment property, you must determine your holding period for the property. Who can use 1040ez Your holding period determines whether any capital gain or loss was a short-term or long-term capital gain or loss. Who can use 1040ez Long-term or short-term. Who can use 1040ez If you hold investment property more than 1 year, any capital gain or loss is a long-term capital gain or loss. Who can use 1040ez If you hold the property 1 year or less, any capital gain or loss is a short-term capital gain or loss. Who can use 1040ez To determine how long you held the investment property, begin counting on the date after the day you acquired the property. Who can use 1040ez The day you disposed of the property is part of your holding period. Who can use 1040ez Example. Who can use 1040ez If you bought investment property on February 6, 2012, and sold it on February 6, 2013, your holding period is not more than 1 year and you have a short-term capital gain or loss. Who can use 1040ez If you sold it on February 7, 2013, your holding period is more than 1 year and you will have a long-term capital gain or loss. Who can use 1040ez Securities traded on established market. Who can use 1040ez For securities traded on an established securities market, your holding period begins the day after the trade date you bought the securities, and ends on the trade date you sold them. Who can use 1040ez Do not confuse the trade date with the settlement date, which is the date by which the stock must be delivered and payment must be made. Who can use 1040ez Example. Who can use 1040ez You are a cash method, calendar year taxpayer. Who can use 1040ez You sold stock at a gain on December 30, 2013. Who can use 1040ez According to the rules of the stock exchange, the sale was closed by delivery of the stock 4 trading days after the sale, on January 6, 2014. Who can use 1040ez You received payment of the sales price on that same day. Who can use 1040ez Report your gain on your 2013 return, even though you received the payment in 2014. Who can use 1040ez The gain is long term or short term depending on whether you held the stock more than 1 year. Who can use 1040ez Your holding period ended on December 30. Who can use 1040ez If you had sold the stock at a loss, you would also report it on your 2013 return. Who can use 1040ez U. Who can use 1040ez S. Who can use 1040ez Treasury notes and bonds. Who can use 1040ez The holding period of U. Who can use 1040ez S. Who can use 1040ez Treasury notes and bonds sold at auction on the basis of yield starts the day after the Secretary of the Treasury, through news releases, gives notification of acceptance to successful bidders. Who can use 1040ez The holding period of U. Who can use 1040ez S. Who can use 1040ez Treasury notes and bonds sold through an offering on a subscription basis at a specified yield starts the day after the subscription is submitted. Who can use 1040ez Automatic investment service. Who can use 1040ez In determining your holding period for shares bought by the bank or other agent, full shares are considered bought first and any fractional shares are considered bought last. Who can use 1040ez Your holding period starts on the day after the bank's purchase date. Who can use 1040ez If a share was bought over more than one purchase date, your holding period for that share is a split holding period. Who can use 1040ez A part of the share is considered to have been bought on each date that stock was bought by the bank with the proceeds of available funds. Who can use 1040ez Nontaxable trades. Who can use 1040ez If you acquire investment property in a trade for other investment property and your basis for the new property is determined, in whole or in part, by your basis in the old property, your holding period for the new property begins on the day following the date you acquired the old property. Who can use 1040ez Property received as a gift. Who can use 1040ez If you receive a gift of property and your basis is determined by the donor's adjusted basis, your holding period is considered to have started on the same day the donor's holding period started. Who can use 1040ez If your basis is determined by the fair market value of the property, your holding period starts on the day after the date of the gift. Who can use 1040ez Inherited property. Who can use 1040ez Generally, if you inherited investment property, your capital gain or loss on any later disposition of that property is long-term capital gain or loss. Who can use 1040ez This is true regardless of how long you actually held the property. Who can use 1040ez However, if you inherited property from someone who died in 2010, see the information below. Who can use 1040ez Inherited property from someone who died in 2010. Who can use 1040ez If you inherit investment property from a decedent who died in 2010, and the executor of the decedent's estate made the election to file Form 8939, refer to the information provided by the executor or see Publication 4895, Tax Treatment of Property Acquired From a Decedent Dying in 2010, to determine your holding period. Who can use 1040ez Real property bought. Who can use 1040ez To figure how long you have held real property bought under an unconditional contract, begin counting on the day after you received title to it or on the day after you took possession of it and assumed the burdens and privileges of ownership, whichever happened first. Who can use 1040ez However, taking delivery or possession of real property under an option agreement is not enough to start the holding period. Who can use 1040ez The holding period cannot start until there is an actual contract of sale. Who can use 1040ez The holding period of the seller cannot end before that time. Who can use 1040ez Real property repossessed. Who can use 1040ez If you sell real property but keep a security interest in it, and then later repossess the property under the terms of the sales contract, your holding period for a later sale includes the period you held the property before the original sale and the period after the repossession. Who can use 1040ez Your holding period does not include the time between the original sale and the repossession. Who can use 1040ez That is, it does not include the period during which the first buyer held the property. Who can use 1040ez Stock dividends. Who can use 1040ez The holding period for stock you received as a taxable stock dividend begins on the date of distribution. Who can use 1040ez The holding period for new stock you received as a nontaxable stock dividend begins on the same day as the holding period of the old stock. Who can use 1040ez This rule also applies to stock acquired in a “spin-off,” which is a distribution of stock or securities in a controlled corporation. Who can use 1040ez Nontaxable stock rights. Who can use 1040ez Your holding period for nontaxable stock rights begins on the same day as the holding period of the underlying stock. Who can use 1040ez The holding period for stock acquired through the exercise of stock rights begins on the date the right was exercised. Who can use 1040ez Nonbusiness Bad Debts If someone owes you money that you cannot collect, you have a bad debt. Who can use 1040ez You may be able to deduct the amount owed to you when you figure your tax for the year the debt becomes worthless. Who can use 1040ez Generally, nonbusiness bad debts are bad debts that did not come from operating your trade or business, and are deductible as short-term capital losses. Who can use 1040ez To be deductible, nonbusiness bad debts must be totally worthless. Who can use 1040ez You cannot deduct a partly worthless nonbusiness debt. Who can use 1040ez Genuine debt required. Who can use 1040ez A debt must be genuine for you to deduct a loss. Who can use 1040ez A debt is genuine if it arises from a debtor-creditor relationship based on a valid and enforceable obligation to repay a fixed or determinable sum of money. Who can use 1040ez Basis in bad debt required. Who can use 1040ez To deduct a bad debt, you must have a basis in it—that is, you must have already included the amount in your income or loaned out your cash. Who can use 1040ez For example, you cannot claim a bad debt deduction for court-ordered child support not paid to you by your former spouse. Who can use 1040ez If you are a cash method taxpayer (as most individuals are), you generally cannot take a bad debt deduction for unpaid salaries, wages, rents, fees, interest, dividends, and similar items. Who can use 1040ez When deductible. Who can use 1040ez You can take a bad debt deduction only in the year the debt becomes worthless. Who can use 1040ez You do not have to wait until a debt is due to determine whether it is worthless. Who can use 1040ez A debt becomes worthless when there is no longer any chance that the amount owed will be paid. Who can use 1040ez It is not necessary to go to court if you can show that a judgment from the court would be uncollectible. Who can use 1040ez You must only show that you have taken reasonable steps to collect the debt. Who can use 1040ez Bankruptcy of your debtor is generally good evidence of the worthlessness of at least a part of an unsecured and unpreferred debt. Who can use 1040ez How to report bad debts. Who can use 1040ez Deduct nonbusiness bad debts as short-term capital losses on Form 8949. Who can use 1040ez Make sure you report your bad debt(s) (and any other short-term transactions for which you did not receive a Form 1099-B) on Form 8949, Part I, with box C checked. Who can use 1040ez For more information on Form 8949 and Schedule D (Form 1040), see Reporting Capital Gains and Losses in chapter 16. Who can use 1040ez See also Schedule D (Form 1040), Form 8949, and their separate instructions. Who can use 1040ez For each bad debt, attach a statement to your return that contains: A description of the debt, including the amount, and the date it became due, The name of the debtor, and any business or family relationship between you and the debtor, The efforts you made to collect the debt, and Why you decided the debt was worthless. Who can use 1040ez For example, you could show that the borrower has declared bankruptcy, or that legal action to collect would probably not result in payment of any part of the debt. Who can use 1040ez Filing a claim for refund. Who can use 1040ez If you do not deduct a bad debt on your original return for the year it becomes worthless, you can file a claim for a credit or refund due to the bad debt. Who can use 1040ez To do this, use Form 1040X to amend your return for the year the debt became worthless. Who can use 1040ez You must file it within 7 years from the date your original return for that year had to be filed, or 2 years from the date you paid the tax, whichever is later. Who can use 1040ez For more information about filing a claim, see Amended Returns and Claims for Refund in chapter 1. Who can use 1040ez Additional information. Who can use 1040ez For more information, see Nonbusiness Bad Debts in Publication 550. Who can use 1040ez For information on business bad debts, see chapter 10 of Publication 535, Business Expenses. Who can use 1040ez Wash Sales You cannot deduct losses from sales or trades of stock or securities in a wash sale. Who can use 1040ez A wash sale occurs when you sell or trade stock or securities at a loss and within 30 days before or after the sale you: Buy substantially identical stock or securities, Acquire substantially identical stock or securities in a fully taxable trade, Acquire a contract or option to buy substantially identical stock or securities, or Acquire substantially identical stock for your individual retirement account (IRA) or Roth IRA. Who can use 1040ez If your loss was disallowed because of the wash sale rules, add the disallowed loss to the cost of the new stock or securities (except in (4) above). Who can use 1040ez The result is your basis in the new stock or securities. Who can use 1040ez This adjustment postpones the loss deduction until the disposition of the new stock or securities. Who can use 1040ez Your holding period for the new stock or securities includes the holding period of the stock or securities sold. Who can use 1040ez For more information, see Wash Sales, in chapter 4 of Publication 550. Who can use 1040ez Rollover of Gain From Publicly Traded Securities You may qualify for a tax-free rollover of certain gains from the sale of publicly traded securities. Who can use 1040ez This means that if you buy certain replacement property and make the choice described in this section, you postpone part or all of your gain. Who can use 1040ez You postpone the gain by adjusting the basis of the replacement property as described in Basis of replacement property , later. Who can use 1040ez This postpones your gain until the year you dispose of the replacement property. Who can use 1040ez You qualify to make this choice if you meet all the following tests. Who can use 1040ez You sell publicly traded securities at a gain. Who can use 1040ez Publicly traded securities are securities traded on an established securities market. Who can use 1040ez Your gain from the sale is a capital gain. Who can use 1040ez During the 60-day period beginning on the date of the sale, you buy replacement property. Who can use 1040ez This replacement property must be either common stock of, or a partnership interest in a specialized small business investment company (SSBIC). Who can use 1040ez This is any partnership or corporation licensed by the Small Business Administration under section 301(d) of the Small Business Investment Act of 1958, as in effect on May 13, 1993. Who can use 1040ez Amount of gain recognized. Who can use 1040ez If you make the choice described in this section, you must recognize gain only up to the following amount. Who can use 1040ez The amount realized on the sale, minus The cost of any common stock or partnership interest in an SSBIC that you bought during the 60-day period beginning on the date of sale (and did not previously take into account on an earlier sale of publicly traded securities). Who can use 1040ez If this amount is less than the amount of your gain, you can postpone the rest of your gain, subject to the limit described next. Who can use 1040ez If this amount is equal to or more than the amount of your gain, you must recognize the full amount of your gain. Who can use 1040ez Limit on gain postponed. Who can use 1040ez The amount of gain you can postpone each year is limited to the smaller of: $50,000 ($25,000 if you are married and file a separate return), or $500,000 ($250,000 if you are married and file a separate return), minus the amount of gain you postponed for all earlier years. Who can use 1040ez Basis of replacement property. Who can use 1040ez You must subtract the amount of postponed gain from the basis of your replacement property. Who can use 1040ez How to report and postpone gain. Who can use 1040ez See How to report and postpone gain under Rollover of Gain From Publicly Traded Securities in chapter 4 of Publication 550 for details. 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